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Long-lived Collateralized Assets and Bubbles

  • Aloisio Araujo
  • Mário Páscoa
  • Juan Pablo Torres-Martínez

When infinite-lived agents trade long-lived assets secured by durable goods, equilibrium exists without any additional debt constraints or uniform impatience conditions on agents' characteristics. Also, regardless of whether assets' net supply is positive or zero, price bubbles are absent when physical endowments are uniformly bounded away from zero. Otherwise, bubbles may occur, even for assets in persistently positive net supply and for deflators yielding finite present values of aggregate wealth.

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File URL: http://www.econ.uchile.cl/uploads/publicacion/2417b908-0743-4f10-aa5a-4fe13811d8a3.pdf
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Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp284.

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Date of creation: Jul 2008
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Handle: RePEc:udc:wpaper:wp284
Contact details of provider: Web page: http://www.econ.uchile.cl/

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  1. Felix Kubler & Karl Schmedders, 2001. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Discussion Papers 1319, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Páscoa, Mario Rui & Araújo, Aloísio Pessoa de & Torres-Martínez, Juan Pablo, 2001. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Economics Working Papers (Ensaios Economicos da EPGE) 419, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Mário Páscoa & Myrian Petrassi & Juan Torres-Martínez, 2011. "Fiat money and the value of binding portfolio constraints," Economic Theory, Springer, vol. 46(2), pages 189-209, February.
  4. Magill, Michael & Quinzii, Martine, 1996. "Incomplete markets over an infinite horizon: Long-lived securities and speculative bubbles," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 133-170.
  5. Manuel S. Santos & Michael Woodford, 1993. "Rational Asset Pricing Bubbles," Working Papers 9304, Centro de Investigacion Economica, ITAM.
  6. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  7. Mário Páscoa & Aloisio Araujo & José Fajardo, 2004. "Endogenous Collateral," Econometric Society 2004 Latin American Meetings 161, Econometric Society.
  8. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  9. Grandmont, Jean-Michel & Younes, Yves, 1972. "On the Role of Money and the Existence of a Monetary Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 355-72, July.
  10. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 102-130, October.
  11. Eduardo L. Giménez, 2003. "Complete and incomplete markets with short-sale constraints," Economic Theory, Springer, vol. 21(1), pages 195-204, 01.
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